Manager: If I can reduce my costs by $40,000 during this last quarter, my division will show a profit that is 10% above the planned level, and I will receive a $10,000 bonus. However, given the projections for the fourth quarter, it does not look promising. I really need that $10,000. I know of one way that I can qualify. All I have to do is lay off my three most expensive sales-people. After all, most of the orders are in for the fourth quarter, I can always hire new sales personnel at the beginning of the next year. Guide questions: What is the right choice for the manager to make? Why did the ethical dilemma arise? Is there any way to redesign the accounting reporting system to discourage the type of behavior that the manager is contemplating?
Manager: If I can reduce my costs by $40,000 during this last quarter, my division will show a profit that is 10% above the planned level, and I will receive a $10,000 bonus. However, given the projections for the fourth quarter, it does not look promising. I really need that $10,000. I know of one way that I can qualify. All I have to do is lay off my three most expensive sales-people. After all, most of the orders are in for the fourth quarter, I can always hire new sales personnel at the beginning of the next year. Guide questions: What is the right choice for the manager to make? Why did the ethical dilemma arise? Is there any way to redesign the accounting reporting system to discourage the type of behavior that the manager is contemplating?
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 10EB: Keleher Industries manufactures pet doors and sells them directly to the consumer via their web...
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Manager: If I can reduce my costs by $40,000 during this last quarter, my division will show a profit that is 10% above the planned level, and I will receive a $10,000 bonus. However, given the projections for the fourth quarter, it does not look promising. I really need that $10,000. I know of one way that I can qualify. All I have to do is lay off my three most expensive sales-people. After all, most of the orders are in for the fourth quarter, I can always hire new sales personnel at the beginning of the next year.
Guide questions:
- What is the right choice for the manager to make?
- Why did the ethical dilemma arise?
- Is there any way to redesign the accounting reporting system to discourage the type of behavior that the manager is contemplating?
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